Re Bell Group NV (in liq) (No 2)

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FEDERAL COURT OF AUSTRALIA

Trevor, in the matter of Bell Group NV (in liq) (No 2) [2017] FCA 927

File number(s): NSD 714 of 2016
Judge(s): JAGOT J
Date of judgment: 1 September 2017
Catchwords: CORPORATIONS – issue of examination summonses pursuant to an order of a Registrar – review of Registrar’s decision – whether material before the Registrar in support of the issue of the summonses was subject to Parliamentary privilege – whether there was  material non-disclosure to the Registrar –whether summonses for examination issued for improper purpose of gaining forensic advantage in Supreme Court of Western Australia proceedings – whether issue of summonses for examination oppressive in the circumstances – whether examination summonses should be set aside – summonses and order for production set aside  
Legislation:

Commonwealth of Australia Constitution Act 1900 (Cth) s 109

Corporations Act 2001 (Cth) ss 9, 53, 596A, 596B, 596C, 596D, 597

Federal Court of Australia Act 1976 (Cth) s 35A

Judiciary Act 1903 (Cth) s 79

Federal Court (Corporations) Rules 2000 (Cth) rr 11.3, 11.5

Imperial Acts Application Act 1969 (NSW) s 6

Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA)

Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015 (WA) ss 4, 7, 22, 33, 36

Constitution Act 1889 (WA) s 2

Insurance Commission of Western Australia Act 1986 (WA)

Parliamentary Privileges Act 1891 (WA)

Cases cited:

Bell Group NV v Western Australia [2016] HCA 21; (2016) 331 ALR 408

Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2013] FCA 623; (2013) 304 ALR 319

Egan v Willis [1998] HCA 71; (1998) 195 CLR 424

Halden v Marks (1995) 17 WAR 447

Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512

John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503

Kimberley Diamonds Ltd v Arnautovic [2017] FCAFC 91

Mees v Roads Corp [2003] FCA 306; (2003) 128 FCR 418

Mendarma Pty Ltd (in liq) [2006] NSWSC 1306; (2006) 24 ACLC 1611

Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36

Palmer v Ayres [2017] HCA 5; (2017) 91 ALJR 325

Prebble v Television New Zealand Ltd [1994] UKPC 25; [1995] 1 AC 321

Re Global Medical Imaging Management Ltd (in liq) [2001] NSWSC 481; (2001) 38 ACSR 214

Re Mactiernan; Ex Parte Coogee Coastal Action Coalition Incorporated [2004] WASC 264

Re Southern Equities Corporation Limited (1997) 25 ACSR 394

Rizeq v Western Australia [2017] HCA 23

R v Murphy (1986) 5 NSWLR 18

Sportsbet Pty Limited v State of New South Wales (No 3) [2009] FCA 1283; (2009) 262 ALR 27

Trevor, in the matter of Bell Group NV [2016] FCA 851

Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955

Date of hearing: 7-8 August 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category:
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Details
Case
[2017] FCA 927
Decision Date

CaseChat Overview and Summary

The case involves Bell Group NV, which is in liquidation, and various individuals and entities connected to the liquidation proceedings. The central issue revolves around examination summonses issued by the liquidator, Garry Trevor, which were subsequently challenged by the examinees. The primary legal questions were whether the summonses were issued for an improper purpose, whether they were oppressive, and whether they should be set aside. The Federal Court had to determine whether the material presented to the Registrar for issuing the summonses was subject to parliamentary privilege and whether there were material non-disclosures that affected the decision to issue the summonses.

The Court found that the liquidator had failed to disclose significant information that would have been pertinent to his application for the summonses. Specifically, he did not disclose an overlap between the issues raised in the summonses and those in the Supreme Court of Western Australia proceedings, nor did he disclose that the examinees were not insiders of Bell Group NV. Additionally, the Court determined that the liquidator improperly placed before the Registrar material that was subject to parliamentary privilege and failed to disclose the existence and consequences of that privilege. These findings led the Court to conclude that the summonses were issued for an improper purpose, namely to gain a forensic advantage in the Supreme Court of Western Australia proceedings, and that they were oppressive under the circumstances.

In light of these conclusions, the Court set aside the summonses and the accompanying order for production of documents. The Court also ordered the liquidator to pay the costs of the examinees in connection with the summonses and orders for production, as agreed or taxed. This decision underscores the importance of transparency and the proper use of legal processes in corporate liquidations.

Orders

Orders of the court

1. The summons and order for production to each of Rod Whithear, Bruce Meredith, Paul Evans, David Hargreaves, Michael Stiassny and Alan Garrett be set aside.

2. Garry Trevor in his capacity as liquidator of Bell Group NV (in liq) pay the costs of Rod Whithear, Bruce Meredith, Paul Evans, David Hargreaves, Michael Stiassny and Alan Garrett in connection with each such summons and order for production, as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

He did, however, fail to disclose another matter which would have been significant to the entire underpinning of the thesis he was advancing in support of the issue of the examination summonses (which was that the proposal for and passage of the Bell Bill and Bell Act had and were intended to cause harm to BGNV). Despite Mr Trevor knowing of the existence of the Authority’s draft report and calling in aid its recommendations in paragraph 118 of his affidavit to support the contention that the concerns of a related entity were justified as the draft report had recommended no payment to that entity, he failed to mention that the draft report had recommended a substantial payment of over $600 million to BGNV. It is difficult to escape the conclusion that this fact was inconvenient to Mr Trevor’s thesis and thus simply overlooked.Interim conclusions It is appropriate to record my conclusions based on the matters discussed thus far. Recognising that not every non-disclosure means that an examination summons must be set aside, I am of the view that the failure to disclose the overlap between the subject matter of the summonses and the WASC proceedings was of such significance that, for this reason alone, the summonses should all be set aside. I am also of the view that the improper placing before the Registrar of material subject to Parliamentary privilege and associated failure to disclose the existence and consequences of that privilege are separate and sufficient reasons to set aside all of the summonses. The summonses to the KordaMentha examinees cannot survive the successful challenge to the other summonses because as Mr Izzo of counsel explained in oral submissions:the liquidator is interested in us [Mr Stiassny and Mr Garrett] because of our ability to throw light on the causes of action said to be available against Mr Hutley’s clients, but the objections which Mr Hutley has articulated, if accepted, would mean that that would not be a feasible or useful exercise, and indeed, if they’re accepted, it would mean that there would have been no basis for the issue of examination summonses against us. The summonses for production of documents necessarily also fall because, under s 596D(2) of the Corporations Act, such a summons depends on the summonses for examination. I turn now to the two remaining issues in the non-KordaMentha examinees’ case, improper purpose and oppression.Improper purpose The non-KordaMentha examinees contend that the summonses to them are infected by Mr Trevor’s improper purpose of obtaining a forensic advantage in the WASC proceedings rather than exploring the examinable affairs of BGNV. This contention is said to be supported by the following propositions considered cumulatively. First, Mr Trevor has been the liquidator of BGNV for 20 years and thus must be “cognisant of those matters that affect its interests”. Second, the proposed examinees are not “insiders” of BGNV. At best it can be said that they might be able to say something about legislation which Mr Trevor believed had impacted the value of the company which does not constitute part of the examinable affairs of the company.

Ratio Decidendi

Legal Principle Established

These reasons for judgment explain why I have concluded that certain examinations summonses and order to produce documents under ss 596B and 596D(2) of the Corporations Act 2001 (Cth) (the Corporations Act) should be set aside. Background For present purposes it is sufficient to record the following. Bell Group NV (BGNV) is a member of the Bell Group of companies. Mr Trevor, who applied for the issue of the summonses, was appointed as BGNV’s liquidator in July 1996. The liquidation has continued since that time. Matters relating to the Bell Group have been the subject of numerous Court actions, mostly in the Supreme Court of Western Australia (the WA Supreme Court). What is sometimes referred to as the Main Bell Proceedings were ultimately settled as a result of which the liquidator of The Bell Group Ltd (TBGL) and other companies within the group received and holds approximately $1.8 billion by or on trust for, various Bell Group companies. The Insurance Commission of Western Australia (ICWA), a statutory corporation constituted under the Insurance Commission of Western Australia Act 1986 (WA), advanced approximately $200 million to the liquidators of TBGL and Bell Group Finance Ltd (BGF) in order to finance the Main Bell Proceedings and other actions. Subsequently, further litigation was commenced in October 2014 concerning the distribution of the settlement proceeds from the Main Bell Proceedings, including proceedings COR 208 of 2014 commenced by ICWA against various parties including Mr Trevor in his capacity as liquidator of BGNV (the WASC Proceedings). By paragraph 13 of the originating process in the WASC Proceedings, ICWA seeks a declaration that BGNV and Mr Trevor as liquidator of BGNV may not take any step to delay, oppose, hinder or resist the amendment of certain trust deeds (which need not be identified here) that may have relevance to the distribution of the settlement proceeds from the Main Bell Proceedings. This declaration is founded on BGNV’s contractual obligations in an agreement dated 4 July 1997 between various parties including the State Government Insurance Commission (a predecessor to the ICWA) and BGNV known as the Reconfirmation Agreement. The WASC Proceedings were prompted by Mr Trevor evincing an intention to act contrary to the terms of the Reconfirmation Agreement, amongst other things, by obtaining ex parte orders from the WASC to the effect that he would be justified as liquidator of BGNV in opposing any step to amend the trust deeds. On 5 May 2015 in the Legislative Assembly for Western Australia a notice was given to introduce the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015 (WA) (the Bell Bill). The Bell Bill was passed by the Parliament of Western Australia (constituted under s 2 of the Constitution Act 1889 (WA)) and assented to by the Governor in November 2015, with the Bell Bill enacted as the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Act 2015 (WA) (the Bell Act).